Barnes & Noble will own about 82.4 percent of Newco while Microsoft will receive a 17.6 percent stake in the new subsidiary

Microsoft and Barnes & Noble Inc. have joined forces to create Newco, which is a new subsidiary that aims to enhance e-book offerings via both companies' digital technologies.

Newco, a Barnes & Noble subsidiary, will incorporate the company's NOOK digital e-reader software with Microsoft's upcoming operating system Windows 8 in order to accelerate both companies' positions in the e-book industry.

Microsoft plans to invest $300 million into Newco at a post-money valuation of $1.7 billion. Barnes & Noble will own about 82.4 percent of Newco while Microsoft will receive a 17.6 percent stake in the new subsidiary.

There are two main goals associated with the Newco venture: to add a NOOK application to upcoming Windows 8 mobile devices, and to bring Barnes & Noble's digital and College businesses together in an effort to offer both students and teachers educational books and tools.

“The formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the NOOK business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments,” said William Lynch, CEO of Barnes & Noble. “Microsoft’s investment in Newco, and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business.”

Both Microsoft and Barnes & Noble have certain benefits in mind that could come from the partnership. Barnes & Noble wants to extend its NOOK offerings through different devices and platforms in the way of recreational and educational e-books, and Microsoft wants an e-reader application available for its Windows 8 devices when they hit the market.

Microsoft is expected to release a customer preview of its Windows 8 operating system this June.

“The shift to digital is putting the world’s libraries and newsstands in the palm of every person’s hand, and is the beginning of a journey that will impact how people read, interact with, and enjoy new forms of content,” said Andy Lees, President at Microsoft. “Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re at the cusp of a revolution in reading.”

Barnes & Noble's partnership with Microsoft is likely aimed to compete with the likes of Apple's iBooks, iBooks 2 and iBooks Author. Its iBooks 2 and iBooks Author launched in January, offering educational textbooks and tools for both educators and students. In the first three days of launch, the iBooks 2 and iBooks Author apps hit 440,000 downloads combined.